Coworking firms are flooding Miami’s office market.
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Miami’s office market is becoming heavily dependant on coworking firms to fill spaces, according to a recent JLL report. The data tracks with a national trend that resulted in coworking spaces accounting for nearly two-thirds of the country’s occupancy gains in 2018.
In Miami, Regus recently leased 35,800 square feet at 801 Brickell Avenue that helped propel the Brickell office submarket to a positive net absorption rate of 15,020 square feet. WeWork also signed a lease for 146,000 square feet at 830 Brickell, an 80-story building slated to open in 2022. The coworking giant will account for 27% of the new building. Meanwhile, Regus subsidiary Spaces is taking 23,700 square feet at Two MiamiCentral, a new office building in downtown Miami that Shorenstein Properties recently purchased for $159 million.
The fast rise of coworking tenants is causing some landlords to consider entering into partnerships with firms that sublease spaces, as well as capping the amount of space allotted to coworking firms, experts say. During a recent presentation before the Commercial Industrial Association of South Florida, Sean Dayton, Regus’ vice president of sales, said the company is hearing from landlords that are trying to determine whether they should do their own coworking spaces. “If done right, it can ultimately become an amenity that can be leveraged by every tenant in the building,” Deaton said.
Hernan Rodriguez, a senior managing director with HFF, said office building institutional owners are concerned that so much of the office absorption rate is the result of coworking firms. “Landlords like having some of their spaces taken by coworking tenants,” he said. “They like it to be between 15% to 30%. Once you start going over those numbers, then landlords become concerned about who is running the show: the landlord or the coworking tenant?”
Claude Esposito, vice president of capital transactions for Shorenstein, agreed with Deaton and Rodriguez. “We have spent a lot of time thinking whether we should have our own [coworking] platform and if we should partner with a company like [Regus],” Esposito said. “We do view [coworking] as an amenity that provides tenants an easy way to expand and smaller users to lease space.”
Esposito said Shorenstein is also taking the amount of space a coworking firm has in a building into account when deciding to make a deal. “When we evaulate properties, 20% is where we are comfortable,” he said.